Iraq budget stalemate deepens over Kurd oil payments

February 27, 2013|Reuters

BAGHDAD, Feb 27 (Reuters) - An impasse over Iraq's budgetdeepened on Wednesday after meetings between the country's oilminister and his Kurdish counterpart failed to resolve a disputeabout payment for oil companies operating in the autonomousnorth.

Iraq's cabinet approved the $118.6 billion budget inOctober, but infighting between Shi'ite, Sunni and Kurdishfactions has scuttled attempts by lawmakers to pass the draftlegislation in parliament.

A Kurdish delegation headed by the region's minister fornatural resources, Ashti Hawrami, left Baghdad empty-handed onWednesday following "tense" meetings with Iraqi oil ministerAbdul Kareem Luabi that dragged on for around five hours.

The budget standoff is the latest sign of a long-running rowbetween the central government and the Kurdistan region over howto exploit the world's fourth largest oil reserves and dividethe revenues.

Kurdistan says it is owed more than 4 trillion Iraqi dinars,or $3.5 billion to cover the costs accumulated by oil companiesoperating there over the past three years, but Baghdad rejectsthose contracts as illegal and has allocated just 750 billionIraqi dinars ($644.33 million).

"Talks over oil company payments have reached a dead-end,"said spokesman for the Kurdish parliamentary bloc Muayadal-Tayeb, describing Baghdad's posture as a tactic to scare offoil companies that have been tempted north by better securityand better contract terms.

"Oil companies need to be paid and we are not prepared tobargain on payments," he added.

The deadlock could postpone major infrastructure projectsand payments to regional authorities in the OPEC producer, whosestate coffers are filled almost entirely by the proceeds ofcrude exports.

A Shi'ite lawmaker from Prime Minister Nuri al-Maliki'sState of Law coalition said the Kurds were not entitled tocompensation because they had not contributed their fair shareto national exports.

"They have been halting oil exports for months and now theywant payment: that's not acceptable," Abbas al-Bayati said.

Kurdish crude used to be shipped to world markets through aBaghdad-controlled pipeline to Turkey, but exports via thatchannel dried up last year as result of the payment row.

A year after the last U.S. troops withdrew, Iraq's economyis improving and should grow 9 percent this year as oilproduction expands, according to central bank projections.

However, it still needs investment in everything frominfrastructure to transport to rebuild the economy, and key oiland investment laws languish in parliament because of politicalturmoil.

"It's difficult to reach an agreement because Baghdad isdealing with this as a political issue rather than a technicalone," said Kurdish lawmaker Farhad Atroshi.